On the measurement of capital services and economic efficiency / by René Durand.: CS15-602/66E-PDF

"This article shows that the traditional assumption of proportionality between capital services and the capital stock made in the applications of production theory is generally not warranted. The article proposes a generalized measure of capital services which admits the traditional assumption only as a special case. Namely, it is argued that the proportionality factor between capital services and the capital stock is a function of both the real interest rate and the economic depreciation rate. Neglecting to take variations in either of these rates into account is shown to lead to paradoxical results. The common notion of economic efficiency is also extended to take the accumulation of wealth into account within a simplified dynamic framework. This sheds new light on the debated choice between the gross and the net of depreciation measure of aggregate output. The theoretical developments made in this article would support the net view"--Abstract.

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